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Stocks to buy (or sell) if Donald Trump wins

Saving for financial health
Mutual fund managers stashing cash, and other MoneyWatch headlines 01:08

Stocks so far are taking the roller-coaster presidential election in stride, marching steadily higher this summer as most investors bet on a Hillary Clinton victory in November.

But if Donald Trump -- and his difficult-to-nail-down economic agenda -- gain ground in polls in the coming months, the major indexes are likely to hit bumps as bad as the British reaction to Brexit. Stocks could fall as the likelihood rises of a Trump victory.

"Equity prices would plunge, high-yield corporate bonds would sell off and U.S. Treasuries and the dollar would rally due to a heavy flight-to-safety flow," said economic forecaster Kathy Bostjancic, head of U.S. Macro Investor Services at Oxford Economics.

Donald Trump on stock market turbulence 00:28

She blames Trump's "lack of experience as a politician, uninformed views, and his unconventional, unpredictable approach to the role of President."


Many Wall Street prognosticators are at least handicapping the Trump scenario -- identifying the stocks and sector plays they think are likely to pay off if Trump's electoral hopes surge.

Some plays may seem obvious.

Global cement powerhouse Cemex (CX) would benefit from a huuuge increase in demand for concrete to build the wall between the U.S. and Mexico that Trump envisions Mexico paying for, according to analysts for Sanford C. Bernstein & Co. U.S.-based infrastructure project managers such as Chicago Bridge & Iron (CBI) could also cash in.

Gold would likely perform well if President Trump looks inevitable -- and not just because he'll need a lot of it to redecorate the Oval Office. Investors flock to the precious metal as a store of value during market turmoil, and it's already up about 25 percent this year on worries over financial-market fallout from Brexit and the U.S. elections.

For-profit colleges such as DeVry Education Group (DV) and ITT Educational Services (ESI) could get a reprieve from intense government scrutiny if the proprietor of the defunct Trump University gets to appoint industry regulators.

Other stock beneficiaries of a Trump surge are less obvious.

Trump's rhetoric on the campaign trail suggests he would roll back oil-and-gas regulation and invest more in the military, which could boost energy and defense stocks. Beneficiaries on the defense side could be Lockheed Martin (LMT) and Northrop Grumman (NOC). An energy beneficiary could be Continental Resources (CLR), whose founder Harold Hamm is a speaker at the Republican National Convention this week and has claimed the recent stock rally is the market embracing Trump.

Donald Trump slams Hillary Clinton on the economy 40:24

The specter of a Trump presidency led New York-based investment research firm Cornerstone Macro for the first time to recommend a net-short portfolio in the case of a Republican presidential winner. The firm recommends buying nine stocks and selling 11 in its Trump portfolio. (Worth noting: The firm's Clinton portfolio is also net-short, recommending investors buy just seven and sell 13.)

But a Trump presidency presents "unusual risks," the firm noted in a July 13 report, which names Lockheed, Northrop, Continental and DeVry among the longs -- stocks to buy and hold -- in its Trump portfolio.

"It is not easy to position a portfolio to capture the risks a Trump presidency could raise," Cornerstone noted, citing the possibility of a trade war, higher deficits, heightened geopolitical risks, loose talk of a default on government debt and the potential Trump won't respect the Federal Reserve's independence.

Among the firm's other suggestions for investors expecting a Trump win: short U.S. Treasurys to account for potential reduced demand for U.S. assets -- especially if the new president revives his campaign musings about renegotiating government debt.

The biggest losers of a Trump presidency could be companies that rely on global trade -- shippers, industrial suppliers and railroads -- and firms that rely on cheap imports. Retailers such as Walmart (WMT) and Best Buy (BBY) could see margins squeezed if Trump starts a trade war that boosts the prices of foreign-made goods, Bostjancic said.

Other losers could be housing and money-transfer providers, both in response to Trump's immigration stance, Cornerstone noted. If Trump follows through on his promise to slow immigration and deport undocumented immigrants, it would depress demand for housing and hurt homebuilders such as Toll Brothers (TOL). And fewer immigrants in the U.S. would suppress the need to send money back home, a potential blow to money-transfer stocks such as Western Union (WU) and Moneygram International (MGI).

Self-deportation also would boost labor costs in other industries, including restaurant companies such as Brinker International (EAT), parent company of Chili's, a favorite of vice-presidential candidate Mike Pence.

Hillary Clinton: Trump is dangerous to our economy 06:49

Analyst predictions are mixed for health care: A Trump replacement for Obamacare could be less generous with subsidies for insurance companies and hospitals, suggesting that investors sell names like Anthem (ANTM) and HCA Holdings (HCA). But investors betting on a Trump win may want to buy drug companies like Gilead Sciences (GILD) because Clinton's plans to regulate prescription drug prices would lower margins on pharmaceuticals.

Ultimately, an ugly Trump-inspired sell-off could lead to a buying opportunity, Bostjancic said. Any agenda he attempts to mount would be "significantly diluted" when he's forced to negotiate with Congress.

In general, stocks in the S&P 500 tend to perform well in election years, and stocks don't tend to change course after Election Day, according to a Credit Suisse analysis of elections dating to 1928. The study found volatility tends to spike when the party holding the presidency changes, while returns are stronger when the party stays the same.

Banks are consistent outperformers in presidential election years, while technology names tend to lag. But some tech companies, particularly those with large stockpiles of cash overseas, could buck the trend with a Trump win -- which could mean an opportunity to repatriate cash at a lower corporate tax rate.

Tracie McMillion, head of global asset allocation for Wells Fargo Investment Institute, expects markets to trend higher despite some downturns in the second half and advises against speculation.

"Should Donald Trump prevail in November, markets could react quite sharply given the fact that a Clinton victory appears most likely," McMillion wrote. "Investors may have a difficult time assessing Mr. Trump's impact on global trade policy and pricing -- and assessing questions about his foreign policy approach."

Your best move to prepare for market unpredictability during a Trump presidency: Stick with low-cost index funds, invest regularly and hold stocks for the long term. You might also turn off those monthly statements for the next four years.

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